KUALA LUMPUR — Countries across East Asia and the Pacific face recession and rising poverty as economies grind to a halt due to the deadly coronavirus pandemic.
In a report published on Tuesday, the World Bank warned that “significant economic pain seems unavoidable” across what was one of the world’s fastest-growing regions before the outbreak, which has killed almost 38,000 people worldwide.
Though East Asia’s developing economies expanded at an estimated 5.8 per cent in 2019, some countries were already struggling with the knock-on effects of the China-United States trade war before the virus emerged in China in late 2019.
Now, according to the bank, a possible 2.8 per cent region-wide contraction looms should a sustained pandemic force lengthy lockdowns and constrict business worldwide.
If the pandemic winds down soon and economies rebound quickly, a best-case scenario could be tepid growth of 1.3 per cent.
China, the world’s second-biggest economy, will see growth of between 0.1 per cent and 2.3 per cent, much lower than recent decades and likely to weigh heavily on neighbouring countries that have become increasingly dependent on trade with and investment from Beijing.
Across Asia and the Pacific, the most vulnerable countries are those marred by “poor disease control and prevention systems.”
Other better-off economies that rely on trade, tourism, and commodities will also face recession, according to the bank.
Malaysia’s economy, which grew an estimated 4.3 per cent in 2019, could shrink by 4.6 per cent – despite the government last week saying it will spend around a sixth of gross domestic product on fiscal stimulus aimed at blunting the impact of the pandemic.
Tourism and manufacturing hub Thailand and commodities exporter Indonesia, which grew 2.4 per cent and 5 per cent respectively last year, could be looking at sharp drops of 5 per cent and 3.5 per cent if the pandemic is not stopped soon.
Across Cambodia, Myanmar and Vietnam – poorer economies that have grown at around 7 per cent in recent years – a worst-case scenario will see growth plunge to between 1-2 per cent.
According to the bank, nearly 24 million fewer people will escape poverty in the region this year than previously predicted, with an extra 11 million in danger of impoverishment caused by recession.
The bank’s report does not cover wealthy Asian countries such as Japan and Singapore, or large and developing South Asian counterparts India and Pakistan.
The bank’s jeremiads echo those made by other analysts, with the International Monetary Fund, the bank’s sister organization, stating on Friday that the world is already in recession.
An Asia-wide recession would be in contrast to the global financial crisis of 2008-9, from which much of Asia emerged relatively-unscathed compared to Europe and North America.
Fitch Solutions warned on Monday that the anti-virus lockdowns imposed across Asia and the Pacific will “have severe consequences” on economies already hard-pressed to pay for the health care costs of rising caseloads.
Based on an assessment of the operations of the world’s 5,000 biggest multinational enterprises,the United Nations Conference on Trade and Development (UNCTAD) warned last week that the pandemic could cause foreign direct investment (FDI) to plummet by 40 per cent – a further blow to developing Asian economies that last year sucked in an estimated 473 billion dollars out of a global FDI total of just under 1.4 trillion.
According to ING Economics, part of Dutch bank ING, the impact of the pandemic on Asian economies will become clearer when the “first full month of Covid-19-affected data” covering March is released by governments, starting next month.Show